Cover The Spread: Key PA Observations From G2E

Posted on October 12, 2018

Las Vegas. The entertainment capital of the world. Gambling capital of the world. Guess that made Sands Expo Convention Center, hosting the Global Gaming Expo (G2E) earlier this week, gambling Capitol Hill.

Gaming industry employees, executives, corporate management, tribal leaders, buyers, vendors, and the media stormed the convention center en masse for the four-day G2E.

Attendees learned plenty from panels, the exhibition hall, and other events, but that doesn’t mean folks at home can’t pick up anything.l

In this week’s Cover The Spread, we catch you up on on the topics most related to sports betting in Pennsylvania. Starting with…

PGCB representative stands pat on tax

Sin City turned into Spin City when Susan Hensel grabbed hold of the mic.

Since gambling legislation passed last fall, many pegged the Keystone State as one of the first to activate regulated wagering.

Alas, the Commonwealth still stands without a sportsbook for now. Though, three properties received sports wagering certificates last week. Plus, another three will make presentations to the Pennsylvania Gaming Control Board (PGCB) at month’s end.

A key reason behind the delay is Pennsylvania’s lofty fees:

  • $10 million for a license
  • 36 percent tax on revenue

In Vegas, Hensel, the PGCB director of licensing, defended those fees. Appearing on a panel titled “How States and Tribes Are Preparing for Legal Sports Betting,” topics ranged from league integrity fees to the appropriateness of federal intervention.

During the question-and-answer portion of the panel, a question arose regarding PA’s tax rate. Hensel’s simple response:

“Well, we have five applicants.”

That’s true. Though those five applicants certainly experienced some hesitation along the way.

PA casinos were gun shy on sports betting and still are

Why else would such a lengthy gap in the timeline exist between the US Supreme Court striking down PASPA in May to Pennsylvania receiving its first application in August?

Also consider that in other states with regulated betting, the majority of casinos take part. Pennsylvania, meanwhile, has only fielded five applications from its 13 possible applicants.

For her part, however, Hensel shed light on her state’s regulatory system — and why the high tax rate on sports betting will work.

One example stems from the expansion of the casino industry of Pennsylvania. Despite a jaw-dropping 54 percent tax rate on slot games, state casinos still generated a whopping $3.2 billion in revenue last fiscal year. In terms of the gaming marketplace, only Nevada performed better.

Basically, the argument goes, the PA sports betting industry should follow a similar pattern. The PGCB, interestingly, still operates without a finalized set of sports betting regulations. Yet Hensel, calm under pressure, assured that Pennsylvania wants to get PA sports betting right without rushing it to market.

New Jersey’s sports betting industry one to emulate

David Rebuck, director of the New Jersey Division of Gaming Enforcement, was on the same panel with Hensel.

The panel also included moderator American Gaming Association vice president of government relations Chris Cylke and  Matthew Morgan, director of gaming affairs with the Chickasaw Nation.

Rebuck, though, represented a state that stands at the forefront of state-regulated sports betting. In three reported months of operations, New Jersey revenue has exceeded $16 million while taking in more than $136 million in handle during the only two full months, July and August.

The state boasts eight retail sportsbooks and eight mobile/online products. For other states entering the fold, like Pennsylvania, New Jersey has developed the template for future regulated markets to emulate.

Rebuck sounds off on betting issues

Rebuck clearly wasn’t going to sit idly by during the G2E panel. The DGE director became a soundboard for a variety of issues.

In late-September, a subcommittee of the House of Representatives met to discuss legalized sports betting. They discussed and heard testimony on whether an overarching federal regulatory framework should be implemented. One witness, NFL Executive Vice President Jocelyn Moore, said that “states are rushing to promote sports betting. And we are witnessing a regulatory race to the bottom.”

Nearly two weeks later, Rebuck engaged with that statement. He tagged Moore’s assessment as “fear-mongering” and “nonsense.”

His vitriol continued when it came to leagues calling for states to be required to purchase official league data. He called it the “red herring” of the sports betting industry. That information, he added, holds “no value” when it comes to traditional wagering. As for integrity fees desired by the leagues? Rebuck called the leagues’ push a “bad marketing tactic.”

Rebuck offers advice for states considering sports betting

The DGE director provided three pieces of advice for states interested in sports betting.

  • First: Educate lawmakers and operators about the industry to keep expectations in check
  • Second: Draft laws and regulations well in advance of discussing sports betting at the legislative level, thereby creating talking points and a foundation for a potential regulatory framework.
  • Third: Study other markets, note how they operate, and expand your vision beyond just the industries on American soil.

ESPN’s Scott Van Pelt chimes in

For years, ESPN anchor Scott Van Pelt has embraced the world of sports betting. He even did so well before states became authorized to legalize the industry.

His Bad Beats segment has long been popular among viewers. And SVP has long shared his insights on which teams (underdogs, most of the time) to wager and why.

Arguably more of the every-man rather than an expert, Van Pelt appeared during a panel to discuss the future of regulated wagering in the US.

On legalizing sports betting and allowing adults to, well, be adults:

“I see this from a common-sense perspective: that this (sports betting, offshore) is done already.”

Of course, Van Pelt addressed a common concern with legalizing wagering. Many worry that having a grander landscape of sports betting could lead to an uptick in scandals in sports. Van Pelt is well-aware of this issue. Resultingly, his response is one reflected and addressed in virtually every state’s laws and regulations.

“It’s a concern and I’m not glossing over it. I think you have to be vigilant in the same way you’ve always had to be vigilant.”

Van Pelt does not side with leagues on official data

Van Pelt’s most enjoyable sound bites derived from questions surround official league data and rights. A natural quipster, Van Pelt let his wits fly.

On leagues wanting states to be required to buy official data:

“They want to sell you what? Information I can get with my eyes? What somebody’s ERA is? What I can see with my eyes? … For one percent (of sports betting revenue), huh? Good luck with that.”

On sports data and rights:

“I don’t get it. You’re gonna put a Fitbit on Tom Brady and then you have to buy that info? Which helps you do what?”

And to close out the panel, SVP addressed the rift specifically between the MLB and the AGA, finding common ground:

“I think everyone’s going to eat pretty well.”

About those integrity fees…

Actually, Kenny Gersh, Executive Vice President of Gaming and New Business Ventures for MLB, didn’t want to use that term.

“I’ll call it what it is,” he said, “which is a royalty.”

Oh, the repartee that took place during this panel. One that, personally, seems more appropriate in dialogue form, like a play. The participants: Gersh and Sara Slane, senior vice president of public affairs for the AGA. Host: The man above, Scott Van Pelt.

Straightaway, Gersh began (continued, really) the hunt for leagues to get a 0.25 percent cut of revenue from wagering. Let the duel begin.

Gersh: “You are going to make money from sports betting. I haven’t heard about a lot of bookies going out of business because they can’t do it profitably. From a fairness standpoint, if you are going to… grant someone the opportunity to make money off our sport, we think we should be involved. We think a quarter point off the top is a fair number.”

Slane: “We have to go through a regulatory process and invest billions of dollars in buildings and licenses You want us to take that risk and (also) pay you, and you… benefit on the back end as well. … I don’t understand why the legal market is viewed as the enemy. The illegal market is the enemy. In order (for us) to compete with the illegal market, it has to be financially viable. What you ‘re proposing is not.”

Gersh (turning to good cop): “It may not be as much money as you want, but (potential profit exists). We should both be in this new world making money together.”

Later, after Van Pelt wondered if leagues and states could eventually strike a compromise. Slane responded.

“I have nothing else to say. We can go around and around, but it comes back to economics… It would not work. I appreciate that you want us to succeed, (but) the only way we are all going to make money is if we get critical mass.”

Sports betting could help NFL in non-fiscal ways

The other member of the panel, Masters Consulting principal Stephen Masters, made a key point after all of this. The expansion of sports betting could lead to an increase in viewership. Take the NFL, Masters noted.

Despite the league’s staunch opposition to legalized wagering, he said viewers “are watching 2.5 times more football than fans who don’t have anything riding on the game.” The same could occur for other leagues.

Interestingly, at a separate panel, former Nevada gaming official AG Burnett weighted in on the topic.

“From a former regulator’s perspective, the integrity fee is ridiculous. It’s a money grab disguised as something about integrity.”

Tying back to Pennsylvania, Hensel addressed the integrity fee issue during her panel time. That topic, along with rights to official leagues data, did not justify much discussion from Pennsylvania regulators, Hensel said.

That is a relief, given how long this process is already taking. Imagine how much worse it would be with league involvement.

Grant Lucas Avatar
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Grant Lucas

Grant Lucas is a longtime sportswriter who has covered the high school, collegiate, and professional levels. A graduate of Linfield College in McMinnville, Grant has covered games and written features and columns surrounding prep sports, Linfield, and Oregon State athletics and the Portland Trail Blazers throughout his career.

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